Transcript: Jason Furman on "Face the Nation," July 17, 2022

The following is a transcript of an interview with economist Jason Furman that aired Sunday, July 17, 2022, on "Face the Nation."

MARGARET BRENNAN: For a broader look at some of the economic headwinds we are facing as a country, we're joined now by Jason Furman. He was the chairman of the Council of Economic Advisers under the Obama administration and is now a professor at Harvard. Excuse me, he joins us from Boston this morning. Good morning to you. Inflation is running extremely hot, as you know, up 9.1% Over the past 12 months, shelter, food, gas, all the things the Fed can't really control that they're hurting people. Are we at the peak yet?

JASON FURMAN: You know, Margaret, I don't know. Oil prices have been coming down, gasoline prices have been coming down. So that headline number that's the one that Americans really feel could be coming down. What was worrisome in this last report is even if you strip out all the volatile things, the underlying core was actually strengthening, we might see the 12 month numbers rising in the months to come

MARGARET BRENNAN: Ouch. You know, looking at forward planning, Bank of America is now predicting a mild recession in the second half of the year, JP Morgan's say the risk of recessions is uncomfortably high. But Citigroup CEO said she sees nothing in the data now to indicate that we're on the cusp of recession. So this-this is the big money bet. What- what's your bet? Where are we on the possibility of recession?

FURMAN: Look, I'm not that much more worried than I am normally. But–

MARGARET BRENNAN: What does that mean?

FURMAN:-- I don't have any confidence in that, in part because the economic signals are really unclear in the first half of the year, it looks like GDP fell. But jobs grew quite a lot. You have business leaders saying they're worried we're gonna go into recession, but they're still hiring people. If they're bankers, they're still making loans to people. You have consumers saying they're really negative about the economy, but they're still spending money. It's hard to square a lot of these contradictory signals right now.

MARGARET BRENNAN:  Right, but you're saying it is quite possible. It's just not clear?

FURMAN: Oh, it's certainly possible. But, I- you know, and certainly more likely than it normally is, the risks are much greater than they normally are. But the idea that a recession is a foregone conclusion, or even over 50% chance. I don't see that. But I'm looking through a cloudy, rearview mirror trying to guess what's gonna happen ahead of us

MARGARET BRENNAN: Fair. I want to ask you about something you've been- you've been tweeting quite a lot about, and that is the fiscal side of the spending plan here. There have been these weeks of talks, we just discussed it, over the President's proposals on climate spending, a number of other things and it collapsed these negotiations in recent days. You've been tweeting in favor of the Democrat's bill, which apparently would expand an income tax on individuals making over $400,000. Why do you think it's advisable to raise taxes in a period of inflation like that? People like Senator Manchin say, we shouldn't be due to inflation.

FURMAN: Yeah, so Margaret, Senator Manchin is absolutely right to be more worried about inflation after the Friday report, that means we're going to need to do more, the Feds probably going to telegraph larger rate increases in the future, it also means Congress should be trying to do their part and helping out if they can cut the deficit, including raising taxes on high income households, that would reduce a bit of spending in the economy, it would cool the economy down a little bit, and actually take some pressure off the Fed, the Fed would not need to raise rates by quite as much if Congress did their job. So clearly, this is a time where everyone should be helping out and bring inflation down.

MARGARET BRENNAN: Well, what's interesting is that when you were on this program back in May, you said one of the reasons the U.S. has incredibly high inflation was the emergency spending that President Biden signed into effect back in March of 2021. And it was spending like that, that Senator Manchin points to and says, see, this is why we need to wait. So why was he right in the past, and he's wrong now to be concerned about spending?

FURMAN: Yeah, the difference is that we're talking about something exceedingly different than- now than then. That was $1.9 trillion of new spending. Now on the table was something like $500 billion of deficit reduction. It was a net reduction in the deficit. I think almost anyone, regardless of where they were on the political spectrum, that was an expert on this topic would agree that would lower inflation. There's Republican friends of mine that would say, Oh, I don't like lowering inflation by raising taxes on high income households, they might have some other way they'd rather lower inflation, but unambiguously on this is going to bring inflation down and from my values and perspectives, it would bring it down in a fair way, certainly much more fair than the tiny reduction in inflation we'll get if 12 million people get cut off their health subsidies and see their premiums go up at the end of the year.

MARGARET BRENNAN: Well, President Biden issued a statement saying he would endorse this slimmed down version of the bill that would- that Senator Manchin is endorsing that would lower health care premiums and prescription drug costs. Are you saying that slimmed down version is just not meaningful?

FURMAN: Oh, look, I think that slimmed down version helps, it would lower inflation, both because of the overall deficit reduction and then very directly by slowing the growth of prescription drugs cost that would be in both likely the private sector and the public sector that you would see that slowdown. So if that bill is the best you can get and I certainly don't know enough about tactics in Washington to judge that bill would be- would be a very good thing to do. You know, even within that bill, by the way, there are some open questions, at least in my mind, if you're not going to raise taxes, how about enforcing the tax code we already have. $600 million goes uncollected every year, audits of millionaires are down 70%. If you fund the IRS, you can collect a lot more taxes without raising tax rates on anyone.

MARGARET BRENNAN: Very quickly, will it add to inflation if all these states, Massachusetts, California, Indiana, Delaware, handout checks to offset inflation?

FURMAN: Absolutely, every one of those states is raising inflation nationwide to benefit the citizens in their own states. Collectively, we'll be worse off because of it.

MARGARET BRENNAN: All right, Jason Furman, thank you for your analysis and for joining us today. We'll be back in a moment.